MARKET WATCH — Another good year for stocks
STOCK ANALYSIS: ASEC Mining (ASCM)
Written for Business Monthly - January 2024 Issue
MARKET WATCH
As 2023 drew to a close, both of the market's leading indices were on their way to registering yet another good year in terms of performance. By mid-December, the EGX 30 (up 69% year-to-date) and EGX 70 EWI (up 91.5%) were embarking on their third and fourth positive years, respectively, in a row. However, since the end of 2020, the EGX 30 was up 16% and EGX 70 EWI 27% in U.S. dollar terms versus 128% and 150% in Egyptian pound terms.
During the Nov. 15 through Dec. 15 period, the EGX 30 added 2.4%, while EGX 70 EWI jumped 11.3%, with advances outnumbering declines by 5 to 2. As noticed on the top gainers' list during the period, small caps took a front seat, led by ASEC Mining (ASCM, up 87%), which by then was the best-performing EGX-listed stock on a year-to-date basis, up some 440%! Meanwhile, other small caps flickered across the screen in green, the likes of Modern Education Systems (MOED, up 60%), International Agricultural Products (IFAP, up 58%), and Atlas Investment & Food Industries (AIFI, up 58%). Still, no events were announced to justify such rallies.
On the other end of the spectrum, another small-cap stock tailed the losers' list. Shares of United Arab Shipping (UASG, down 25%) suffered after the company's extraordinary general assembly held on Dec. 7 after trading hours agreed to liquidate the company as its retained losses exceeded half its paid-in capital. In the following five trading sessions, the stock fell 24%. Ironically, this should not have come as a surprise as the company has long been unable to generate profits, with its retained losses registering EGP 440 million, or more than double (not just half!) its capital. Unfortunately, this is another stock to bite the dust after Egyptian Iron & Steel (IRON) suffered the same fate more than two years ago.
Overall, investors should generally be happy with the EGX 30 hitting an all-time high of 25,945.58 during trading on Nov. 27. Investors, mainly individual Egyptians, have been bidding stock prices higher as they look for cover from stubbornly high inflation to preserve their purchasing power. Also, Egyptian institutions have been window-dressing for the year's end, firming up their positions in certain large caps. But with the presidential election concluded and the IMF putting another pound devaluation on the back burner, the question is whether stocks can have another good year. High interest rates should bode well for banks, but absent a significant pound devaluation, they could lead certain stocks to unwind some of their gains.
STOCK ANALYSIS
ASEC Mining (ASCM)
ASEC Mining (ASCM), or ASCOM, has long been considered an underdog. Only recently did the company's stock, a 54% owned subsidiary of Qalaa Holdings (CCAP), buck that trend. The reason? The company announced its wholly owned subsidiary is selling the remaining 35% it owned in an Ethiopian gold mine to Allied Gold Corp., a Canadian company, for nearly $100 million. That was equivalent to ASCOM's market cap at the time of the announcement. The stock rose 87% during the period, with 64 million shares worth some EGP 2.9 billion changing hands.